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Alan Greenspan: Economy will 'fade' dramatically because of entitlement burden (cnbc.com)
17 points by hhs 39 days ago | hide | past | web | favorite | 23 comments

Why would anyone listen to greenspan after 2008? A dotty old randian who doesn't know what he thinks he knows

Greenspam was associated with Rand at least through 1977 when he was chairman of Ford's Council of Economic Advisors, a position that Rand explicitly approved. She died in 1982 and Greenspam was appointed to the Fed in 1987 so she never had a chance to comment on that position.

However, based on Rand's writings on ethics and capitalism it would be immoral to accept the Fed chairmanship unless you had an explicit charter to shut it down which was obviously not the case for Greenspam. Rand would have denounced Greenspam in no uncertain terms but she was dead.

Accepting the Fed position was an explicit repudiation of Rand's philosophy and views on capitalism regardless of Greenspam's prior association with Rand. It was also an implicit repudiation of the articles (especially the article on gold) that he wrote in Rand's anthology "Capitalism: The Unknown Ideal" in which Greenspam authored three articles; "Antitrust", "Gold and Economic Freedom", and "The Assault on Integrity". He is no more a "randian" than my mom, though he is dotty and old.

Greenspam would have been wise to read and heed an article written also in Rand's book on capitalism; "The Anatomy of Compromise" in which she explains the principle of Sanction. Rand wrote;

> In any collaboration between two men (or two groups) who hold different basic principles, it is the more evil or irrational one who wins.

Greenspan chose to collaborate with dishonest bankers, currency cranks (in the Fed) and bureaucrats (in the bank regulators) who wanted make it possible to "somehow" inflate the currency, give loans to the unqualified and to back quasi-private debt (Fannie Mae and Freddie Mac) with govt guarantees all without consequences. He thus set the stage for the 2008 mortgage banking crisis.

Ok so maybe we should axe FICA taxes for employer and employee and just borrow it by issuing more treasury securities? I mean, he's not complaining about unfunded military expenses that are paid for exclusively by borrowing. If military adventures had their own tax, maybe we'd be thinking a little more clearly about our priorities?

> “Without any major change in entitlements, entitlements are going to rise. Why? Because the population is aging. There’s no way to reverse that, and the politics of it are awful, as you well know,” Greenspan added.

Funny that he'd lay the blame on entitlements when it could just as easily be laid on out-of-control military spending with the Terrorism boogeyman cracking the whip. Why, because neither the Republicans nor Democrats can keep their entitled noses out of other countries' (or their own citizens') business. There's no way to reverse that and the politics are truly awful.

The bigger problem is that the American people have collectively decided that debt simply doesn't matter. Congress and the President pass budgets with eye-popping deficits. The Tea Party and its calls for fiscal restraint are as good as dead. Sanders, Warren, and the left wing of the Democratic party are on the ascendency and will do everything they can to implement programs with high price tags. Republicans will block any attempt to raise taxes to pay for it all. The Federal Reserve has decided to pull the plug on quantitative tightening, making it that much easier for Congress to balloon the national debt.

Greenspan bears major responsibility for this mess. His complicity in letting asset bubbles inflate well beyond control, and his rush to paper over the resulting mess leads us where we are today. A financial house of mirrors where bullshit passes for money and only the poor get hurt for their financial stupidity.

> Funny that he'd lay the blame on entitlements when it could just as easily be laid on out-of-control military spending with the Terrorism boogeyman cracking the whip.

Out of control military spending? As a percentage of GDP military spending has had an overall downward trend since the Korean War. Measuring in terms of dollars does not account for overall growth of the economy. There's nothing "out of control" about US military spending.


The chart is incorrect because it does not take into account hundreds of billions in veteran's benefits, nor interest paid on past military spending (and as there is a budget deficit, the current year's military deficit spending will be tacked onto next year's military debt interest).

This cuts both ways, the spending on veterans post Korean War, WWII, and the Vietnam War was probably very large as well. The point is the overall trend is down. The economic burden of the US defense budget is decreasing, not increasing.

Our military spending as a percentage of GDP has dropped by roughly 4x since the 1960s. From around 12% to around 4%. In no way can a reasonable person describe our military spending as "out of control".

When you “can’t afford” healthcare and education for your citizens, but have a bigger military than the next 10 countries combined, your military spending is out of control and your priorities are in drastic need of re-evaluation.

Regardless of your thoughts on what military spending should be, the above poster's claim that military spending is a greater cause of economic burden than entitlements is patently false. The economic burden of the United States military spending has been diminishing, not increasing.

We’re still doing things like spending $2 billion to cleanup waste left from making nuclear weapons in the 1940s.

Which accounts for less than half of one percent of the US defense budget. The fact remains: we're spending 3-4x less of our GDP on defense than we were in the 60s. There's no way to justify the claim that defense spending is "out of control".

I was referring to one project that I know about in New Mexico. $2 billion is definitely not the entire budget for environmental remediation, and it also is funded through DoE etc, not necessarily the military.

I think it would be easy to support the assertion that military spending is out of control. Just because it was worse in the 60s doesn’t mean it isn’t wrong now. Our military has very sloppy accounting and has lost a couple trillion dollars, but we keep handing them 3/4 a trillion a year and rising. The amount of potential other projects which would be extremely useful for the populace, and we could find with just last year’s increase of over $50 billion, is staggering. Not to mention, a good portion of this is borrowed money. Military activities continue to create pollution that we’re going to have to clean up in the future. Given the government’s other financial obligations that are going underserved such as infrastructure and health care, it’s obvious fiscal irresponsibility, to say the least.

I’m all for being able to defend ourselves. I would feel a lot better if I felt like our resources were being well spent all around.

How is a form of spending that has had an overall downward trend of 3-4x over the course of the last half century "out of control"? A consistent reduction over time is the complete opposite or what I and probably most readers think of when they think of out of control spending.

I’m not the one who started using the phrase “out-of-control”, so I don’t feel the need to keep defending it (you might be mistaking me for the poster who did use that phrase?). I’m still far from convinced it doesn’t apply, however.

Even adjusted for inflation, United States military expenditures have risen by over six times since the 40s. Calling it a “consistent reduction over time” is fairly ludicrous. That the rest of the economy has expanded more isn’t really relevant to my point of view. We spend three times as much is the nearest other country, every year. I don’t really care if it’s “out-of-control”, but I am concerned that it’s clearly excessive. Regardless of what the GDP is, we could be spending the vast resources to the tune of $300 billion and tens of thousands of employees on something else.

The inflation adjusted GDP has also risen by more than a factor of ten. Inflation adjusted dollars is not an effective comparison. A country's economic output, even when measured in inflation adjusted dollars, is not static. Pointing out a rise in inflation adjusted dollars and failing to put it in context with GDP is very naive. The US Military as a percentage of GDP spending is not especially abnormal when compared to other active militaries.

I don’t consider it a meaningful comparison. The US has long been far in the lead in economic output as well as military investment. Who are we being compared to?

My point is that we spend hundreds of billions wastefully and direct a vast amount of resources in directions that are not beneficial or useful. This has nothing to do with percentages of GDP. It’s also a very high percentage of government expenditures while when the government has been running deficits and been in debt for decades.

Thinking military spending is wasteful and better spent elsewhere is your own opinion. Claiming that it is out of control, however, is a claim of fact and one that does not hold up to scrutiny. Military spending is very much in control. We have reduced it by a factor of 3-4x. Measuring against inflation adjusted dollars is not effective, since economic output is variable and inflation comparison is subjective. Measuring against the % of GDP answers the questions "what portion of a society's economic output is being directed towards defense?" And in the United States this figure has gone down considerably.

I consider the US economy and military expenditure to be such a special case that I do not consider the GDP to be a useful measure of anything. As such, claiming that we have reduced spending when actually it has increased by nearly half a trillion in real terms is ludicrous. What has actually happened is the rest of the economy has expanded in excess of our military. Does that mean that we need to make our military four times as large? No. That would just be a plain stupid thing to say as it’s clearly unnecessary.

You seem to be quoting me as saying that I consider all military spending to be wasteful. No, I consider the wasteful military spending to be wasteful, such as when they spend billions of dollars develop an aircraft that never functiona, needlessly pollute instead of disposing responsibly, which requires billions of dollars of clean up, or lose track of $2 trillion. Would you say those things are not wasteful, or are necessary for national defense?

Next, the figures you’re talking about don’t include the cost of wars.

Also, you are comparing to the times that we had a serious hostile geo- political rival that was considered to be our equal, and engaged in a military spending contest. Of course relative military spending has decreased since the 1960s - the USSR outspent us at times, now China, our closest rival, is at 25%. A GDP relative decrease does not mean it is not still excessive, and I don’t care whether it is “out of control”.

You seem to have some concept that we need to compare to the past to determine whether the present is acceptable. I don’t see why that makes any sense.

If so much negligence happened in any other country, that countries currency would be fcuked.

But America has privileges and unfortunately, time and again, those have been abused.

The only and only thing stopping this Trainwreck from collapsing is being the reserve currency. The future will be a story to tell in economic textbooks of the future.

Exactly this. US Dollar's reserve currency status adds 30% value to USD. Every one else in the world want to export their goods to America for USD notes.

That's false. Everybody who gets USD for their exports rushes to exchange them for EUR to import consumer goods.

I'm pretty sure that the "American people" are not the ones signing the checks. It's ludicrous to even imply that Joe Schmoe thinks that debt doesn't matter or that he agreed to [collectively] be overdrawn for more than he's worth.

I'm also of the opinion that debt doesn't matter...as long as GDP increases at a faster rate than debt does.

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